Sales of 1.2923 trillion KRW... 7.4% decrease
Rising manufacturing costs, sluggish health supplement sales
"Turnaround expected in the second half"
Due to the impact of rising manufacturing costs, KT&G's operating profit in the first quarter of this year plummeted by more than 25% compared to a year ago.
KT&G announced on the 9th that its first-quarter operating profit was tentatively estimated at 236.6 billion KRW. This represents a 25.3% decrease from 316.5 billion KRW in the previous year. During the same period, sales amounted to 1.2923 trillion KRW, down 7.4% from 1.3957 trillion KRW the previous year.
KT&G explained, "Consolidated sales and operating profit declined compared to the previous year due to increased manufacturing costs caused by inflation, the end of large-scale real estate development projects, and decreased sales of health functional foods due to domestic consumption contraction."
However, meaningful results were achieved in the domestic and overseas electronic cigarette (NGP) and overseas cigarette sectors, continuing from last year.
For domestic and overseas sticks, the core growth drivers of the NGP business, quantity, sales, and operating profit all increased. In particular, global sticks sold 2.11 billion units, a 14.7% increase compared to the same period last year.
Additionally, total overseas cigarette business sales continued growth for the third consecutive quarter. Thanks to price increases in key countries such as Indonesia, sales rose 10.1% year-on-year to 291.8 billion KRW.
Meanwhile, KT&G expects performance improvement to accelerate in the second half of the year. Since the inauguration of President Bang Kyung-man at the end of March, KT&G has been focusing on structural innovation for breakthrough growth in its three core businesses (NGP, overseas cigarettes, health functional foods) under new leadership.
First, to maximize performance creation, the company strengthened its responsibility management system. Under the CEO, new strategic, marketing, and production divisions were established, enhancing organizational efficiency and execution under the responsibility of each division head. Furthermore, in overseas markets, KT&G established regional CICs (Company-In-Company) and production headquarters to build a business management system that accelerates global business expansion.
Moreover, KT&G is operating an ‘ROE (Return on Equity) Enhancement Project’ to improve profitability and plans to actively participate in a corporate value-up program aimed at increasing shareholder value through faithful implementation of a mid-to-long-term shareholder return policy. This includes cash returns to shareholders totaling 2.8 trillion KRW over three years (2024?2026) and the cancellation of treasury shares amounting to approximately 15% of the total issued shares.
A KT&G official said, “We are focusing on strengthening the fundamental competitiveness and structural innovation of our core businesses to leap to the ‘global top tier.’ Despite the challenging external environment, KT&G plans to make every effort for a second-half performance turnaround by expanding core business competitiveness in the global market and continuously implementing operational efficiency activities.”
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